Europe - The Final Countdown

UK:

Theresa May finally bowed to the pressure of Parliament yesterday after admitting that for the first time, Brexit could be put on pause if MPs fail to back her ‘revised deal’. May’s current deal has very few changes in at the moment, only ‘amendments’ so it’s likely to be heavily rejected in Parliament again. With the vote being cancelled by May this week, she has now wound down the clock to as late as possible. Under the new (and hopefully final) plan, MPs will have another ‘meaningful vote’ on the update deal on March 12 at the latest, if MPs reject the deal, May would have a second vote on March 13 to ask if MPs want to leave without a deal – a senior aide to the government said there is a large majority that want to stop a no deal. The final vote on March 14 in which MPs will vote on whether Parliament want an extension of Article 50 until the end of June. May has warned however that it would be ‘almost certainly a one-off’ as the UK is not voting in May EU elections and therefore beyond May, the UK will have no representation in European Parliament.

The news yesterday will be music to many people’s ears as a no deal scenario could potentially be catastrophic to several industries in the UK. A secret report released yesterday, outlined that the government and major businesses are still very unprepared for a no deal. Part of the report mentioned that out of 240,000 UK companies that would need to register for new customs documentation in the face of a no deal, only 40,000 have done so. This is ultimately why there is such a large majority in Parliament to eradicate the option of a no deal Brexit. The new schedule appears to be a more detailed plan of how Brexit will finally play out until the end of March and hence sterling reached 21 month highs against the euro and 5 month highs against the US dollar. 

 US:

All eyes were on FED Chair Jerome Powell yesterday as he gave testimony to the US Senate Committee. Powell’s recent dovish tone endured citing slowing growth in Europe and China alongside ‘elevated’ uncertainty around Brexit and trade are continuing to weigh on the FED’s policy outlook. Powell went on to reiterate the FED’s ‘patient’ approach to interest rate changes, this is after the FED withdrew its previous plans in January for further rate hikes and was publicly criticised of being unduly hawkish. Powell then went on to say some economic data have ‘softened’ in the past 2 months, which was reflected in the only data release yesterday in the form of US housing starts. Forecasts missed estimates by 172k coming in at 1.078m for the month of December. The dollar was rather muted for the day with the dollar index ending up .4% down on this morning’s open. Jerome Powell resumes his testimony today which comes to a close on Thursday. Data wise also moves us along to the end of the week with Thursday and Friday both including a stream of potentially high impact data.

EUR:

Political turmoil continue to mar the bloc, with the latest coming from Italy’s anti-establishment Five Star Movement who failed to win regional elections. Tensions within the populist government are being closely watched for signs that it could being down the administration, Five Star is the largest group in government however have been overtaken in the polls by a right-wing coalition including the anti-migration party Northern League, headed by Matteo Salvini. EUR dropped 0.37% against the USD with 1.14 the solid resistance level at present.